Vacation Rental Homes Soon to be Subject to Sales Taxes in Costa Rica

If you are planning to purchase a vacation rental home in Costa Rica or you already own one, you could soon face a sales tax on your property. According to the latest news, the executive branch of the Costa Rican government is planning to pass a proposal that would result in placing a sales tax of 13 percent on all rental properties in Costa Rica.

It should be noted that this proposal is not new, but the administration has added a definition to the bill for the previously vague term of 'temporary houses.' That term is now defined as homes with leases of less than one month.

The bill, if passed, would apply to homes throughout Costa Rica, regardless of whether those homes are located in tourist areas or not. As part of the Bill to Better the Fight Against Tax Fraud, the idea of the tax is to bring in tax money from rental properties while also leveling the playing field between vacation rental homes and hotels, which are already subject to tax. By adding the definition of the term "temporary homes," the bill has now become easier to execute.

While the current tax rate is 13 percent, the ultimate plan is to gradually increase the tax rate to 15 percent.

It has been reported that the executive branch is determined to pass the tax because it would make it possible to reduce the primary deficit from its current level of 2.8 percent to .9 percent of the GDP.